Exchange Basics: What Is A Limit, Stop-Limit Or Market Buy?
Trading on an exchange can be very confusing for a beginner that doesn't have any experience in trading whether it is cryptocurrencies or stocks. When you just have the intention of buying a certain coin you can feel bombarded by all of the different options there are you can chose from.
Market buy
Let's start with the simplest option: the market buy. As the name suggests this will make an order for the current market price of the chosen cryptocurrency. This is the easiest out of all the options as you don't have set any values. If you are a beginner and you only want to optain a certain currency and you don't plan on actively trading it back and forth then this is the right purchasing option for you. Another advantage is that your order will get filled very quickl as many people chose to market sell which is the same as a market buy but in the other direction.
Limit Order
A limit order is an order where you can set a limit which means that the buy order will only get filled if the price goes below your limit price. If you sell then the order will only get filled if the price goes above your limit price. While this is a bit more complicated I would recommend to get used to bacause even if you get only a small price advantage it can add up and you know exactly how many coins you will get.
Stop-Limit Order
A stop limit order is similar to a limit order but you have to enter two values for your order the first one is the limit price just like in the limit order and the second one is the stop price. The ladder is the price point that will activate your order which means that if the price stays above this above or below the point the order will never get activated which would have the same effect as not having placed an order in the first place. If the stop price is reached then the order is just the same as a limit order. This tool is only useful if you need complete control over your order and everything has to be at the perfedt moment which means that this is only helpful if you are an active trader. If you are an investor looking to hold onto your crypto for a long time you don't have to worry about this order option.
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Very nice post, I remember being confused about it in the beginning too :)
Thanks very much, I think it's confusing for everyone in the beginning ;-)
Good post, very helpful for beginners !!
Thanks I am glad it helps
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